Demand shifts and market structure in free-entry oligopoly equilibria

This papers examines the structural implications of demand shifts in free-e ntry oligopoly equilibria. The model generalizes the conjectural variations framework to consider asymmetric firm conjectures, allows for the possibil ity of cost differences across firms, and endogenizes conditions of entry a nd exit in the industry. In non-competitive environments, changes in incumb ent output and industry profitability are inversely-related to changes in t he equilibrium price following a demand shift. In response to rotations of demand through the equilibrium point, changes in profitability are positive ly-related to changes in industry concentration and, when marginal costs ar e non-decreasing, inversely-related to changes in market power. (C) 1999 El sevier Science B.V. All rights reserved.